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Three-Year Moving Average

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Data collected on the yearly registration for a seminar at GIPS are shown in the following table:
Year 1 2 3 4 5 6 7 8 9 10 11
Registrations (000) 4 6 4 5 10 8 7 9 12 14 15
a) Develop a 3-year moving average to forecast registration from year 4 to year 12.
b) Estimate demands again for years 4 to 12 with a weighted moving average in which registration in the most recent year are given a weight of 2 and registration in the other 2 years are given a weight of 1.
c) Graph the original data and the two forecasts. Which of the two forecasting methods seems better?

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Solution Summary

This solution shows how to calculate a 3-year moving average and a 3-year weighted moving average. Then the two forecasts are compared and the more suitable one is chosen by means of MAD (mean average deviation).

Solution Preview

(a) Basically, you calculate the 3-year moving average by adding year 1, 2, and 3 registrations and dividing by 3, and then input that as the year 4 forecast (4.67). For the Year 5 forecast (5.00) you drop off the first year and add in the latest year's actual registrations, years 2, 3, and 4 and divide again by 3, and so on year after year.

Year Registration 3-yr MA 3-yr weighted ...

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